Big tech was again the must-have investment story throughout 2021 with the FAANGs seemingly dominating all aspects of personal and business life.
Nothing seems capable of shifting the positions of Facebook (Meta Platforms), Apple, Amazon, Netflix, Google (Alphabet) and Microsoft (plus Tesla, Nvidia), but jog down a level and there is much chopping and changing among the tech wannabes.
However, given that the industry encompasses so many different types of organisations that operate in completely different markets, it’s hard to pinpoint whether the entire industry can continue its growth going into 2022.
The pandemic played a big part in expediating advancement. Any company that made working remotely easier, like Zoom, experienced a rocketing in its share price.
Cloud services, coding companies, and many others also indirectly benefitted because of the impact of the pandemic for the same reasons.
Some of the tech sub-branches however, like financial tech or cyber-security, experienced their boom as the world was starting to lift restrictions, and not coinciding with the first lockdowns.
With that in mind, let’s dive deeper into some of these sub-sectors and see what they have been doing and whether they can continue that growth into the new year.
Robotics
Robotics is an area that suffered somewhat during 2020 thanks to COVID.
Used largely to replace humans for monotonous and repetitive tasks, demand for robotics dropped, mirroring demand for the products they were crucial in assembling.
For example, research by Statista found that 63.8mln cars were sold globally in 2020, lower than the yearly average for the previous 10 years.
That coincided with the demand for robotics in the automotive industry declining, with The International Federation of Robotics (IFR), reporting that 382,000 industrial robots were installed globally, the first year of decline in worldwide installations.
However, the IFR reported that there are 3 million industrial robots operating in factories around the world – an increase of 10% from the 2020.
And as the industry recovers from the pandemic, there is a belief among commentators that the current need for jobs, alongside the wage inflation, will only twist the arm of companies further to turn to robotics in a way to reduce costs.
Russ Mould, investment director at AJ Bell said, “I'm sure that that is an area that will be one of even greater focus, given that we're now looking at substantial wage inflation.”
“There's a hot competition for labour out there, and we are actually seeing job vacancies exceeding unemployment in the US, with it not far off in the UK.”
“Unfortunately, one way that companies will probably look over the long term to tackle that is to automate and actually do away with staff so that they're having to pay less in terms of wages in the long-term.”
This, of course, opens opportunities for businesses who create robotics, with greater demand likely to ensue.
To add to this, Rosanna Burcheri, who is a global equities manager at Artemis Funds, believes that investments in robotics will play a big part in the portfolios in the future.
But, rather than focusing on the finished product, which usually possess higher barriers to entry, she believes targeting the manufacturers of robotic pieces is the real value for money.
Her trust has invested in companies like Nabtesco and Harmonic (NASDAQ:HLIT) (Harmonic (NASDAQ:HLIT)) Drive, which manufacture precision reducers.
She also highlights Japanese businesses in this area to target specifically, with the government there anticipating its labour force to shrink 40% by 2065, and as a result is much further along than other countries in investing and developing in this sector.
Fintech
Fintech, or financial technology, is another area that experienced a good year especially in the UK.
Most notably, Revolut, the financial technology company that raised over £1bn in various rounds of funding and became the largest start-up ever here at US$33bn.
READ: Revolut crowned UK's most valuable fintech after US$800mln funding round
Again, that is a trend that Mould believes will continue into the new year, citing discontent among consumers of the ‘big four’, with these new fintech companies offering a wider range of services than the traditional banks.
“That's going to be a very, very hot area still. There's clearly residual, discontent, resentment, and unhappiness with major High Street lenders in the wake of the financial crisis.”
Mould also highlights the accessibility and ease-of-use that fintech offers as opposed to the banks.
“I think there are a lot of customers that spend hours on the phone trying to get a hold of someone, so people are happy to turn to a low-cost high functionality solution that's readily available on a portable device.”
Augmentum Fintech PLC (LSE:AUGM) has a large portfolio of fintech companies, several of which have already had done very well.
Part of its portfolio is in Seedrs, which has risen to fame as a crowd funding platform.
The site has helped over 600 businesses, with more than £320mln invested through the site, with plenty more fundraising rounds planned for the next year according to its website.
Semiconductors
Seemingly an area of tech that maybe hasn’t performed as well as its counterparts is the semiconductor business.
Throughout the year, there have been reports of shortages and/or supply issues, that have hampered the manufacturing of everything from phones to cars.
READ:Auto giants BMW and Stellantis return to profit in first half, but remain wary on semiconductor shortage
However, is it all doom and gloom for this particular area? Apparently not.
The World Semiconductor Trade Statistics (WSTS) are reporting that there has been a 20% sales growth in semiconductors this year, with an increase of 9% forecasted for the following 12 months.
Mould believes, therefore, that the issue is not of supply, but of demand.
“I'm not convinced that supplies the problem. I'm slightly more inclined to believe that demand is the issue and that central banks have, for the best possible reasons, overstimulated the global economy.”
If we look at what some of the investment trusts are doing, one of the big hitters has 5.5% of its portfolio in ASML, a semi-conductor company based in the Netherlands.
Scottish Mortgage Investment Trust PLC (LSE:SMT), which has a market cap of £19bn, puts ASML as the second-largest company in its portfolio behind Moderna and ahead of Tesla, a sign of confidence in fourth-largest semi-conductor business by market cap.
It also adds that without the existence of companies like ASML, the change delivered by more well-known companies like Tesla and Moderna, wouldn’t be possible.
Highly regarded Mid-Wynd Investment Trust also has a few semi-conductor companies in its portfolio, TMSC and Tokyo Electron, a sign of confidence from investors in the long-term appeal market.
Can the tech juggernaut keep moving forward?
In a nutshell, yes. While some components of the market may perform extremely well, others may struggle.
What can be said though, with certainty, is that as long tech continues to innovate, and make the lives of businesses and individual consumers easier and cheaper, it will continue to grow exponentially.
Fintech companies continue to make managing your money easier, robotics becoming cheaper than manual labour, even the metaverse starting to open more virtual opportunities in the comfort of one’s home all make work and lives easier.
When that happens, the newest tech will replace the old, and the cycle will continue.